Contributed by Baker Tilly
The Tax Cuts and Jobs Act created various tax benefits for investors in designated qualified opportunity zones (QOZs). Through an investment vehicle called a qualified opportunity fund (QOF), a taxpayer can invest realized capital gains into a QOF in exchange for three tax benefits: (1) deferral of tax on invested gains until the earlier of 2026 or disposition of the QOF, (2) partial forgiveness of tax on invested gains if the QOF is held for at least five years, and (3) an exemption for all gain upon the sale of the QOF if held for at least 10 years. In October 2018, the Department of Treasury released a first set of proposed regulations related to investments in these QOZs.
The Treasury recently released a second set of proposed regulations, which expand upon and attempt to clarify the October 2018 proposed regulations as well as the original legislation. In this alert, we highlight the key takeaways from the new proposed regulations.